Today on the Edge of Innovation, we are talking with Taylor Robinson of PLG Consulting about the business of logistics and moving sand around the world.

 

 

Introduction

Go Pound Sand. Moving Sand Around the World with Taylor Robinson of PLG

 

Paul: Hello. My name is Paul Parisi, and I’m here with Taylor Robinson, the president of PLG Consulting. Hi, Taylor.

Taylor: Good afternoon, Paul.

Paul: So what else do you cover in logistics? I mean, is it just… I don’t want to say “just” what you do, or is that one segment of what you do at PLG or are there other things?

Taylor: Yeah. That would be one-third of what we do. One-third is we help people improve their logistics. We bring experts that have been in those industries for 30 to 40 years come in and quickly solve their problems.

Paul: What kind of problems do they have?

Taylor: Cost, efficiency, waste, poor pricing on their services that they buy. So we’re helping them get better. And you call them…those are shippers. They’re the ones that are using…they’re paying for the freight. They’re paying for the logistics and the handling. They need to lower that cost to be competitive.

Paul: And how far can you go? I mean, do they have to revisit this? Or is it something that they do it once and I do this in 2017, and I don’t have to do it for another 20 years, or is it a constantly changing…

Taylor: It depends on the industry. Some of the industries don’t change much. And we will occasionally find a client that, we look over them at a very deep level, and there’s not a lot we can help.

Paul: Because they’ve done a good job.

Taylor: They’ve got the great team. They know how to do the right processes. They’ve got good technology. So therefore, they’re best in class. But that’s pretty rare because people haven’t kept up. Logistics is kind of sometimes a lower-tier job or, in the organization, it’s not as prestigious. So therefore, it gets kind of put in the corner, so we can usually go in and help folks, with our experience. And it also helps that we see multiple people in an industry, and we can take those learnings and apply them and really look at what’s best in class versus this is the way we’ve always done it.

Paul: Right. Yeah. So rather than knowing just one way to do it, you’ve seen what works and what doesn’t work across industries. So that’s really cool. So you don’t have to make mistakes on me.

So now, alright. I’m somebody. I’m working in a big company that does this plastic stuff. I make the bags that wrap bread, let’s say. Who am I? Am I a vice president, a CEO? And, what do I do? Because I know that’s only one tiny part of their job. Or is it that that’s all they do is worry about the logistics?

Taylor: Mostly we start out with the people that have logistics folks on their team. Usually it’s a C-level person that we find a way in. Sometimes we’re brought in from the working team. They just can’t find a solution, and they get permission to go find us. But normally, they don’t want us in there if they’re not a good player, they don’t want us to come in.

Paul: Right. Well, okay. So there, there’s a crisis that occurs. What manifests that crisis? Is it that we just can’t compete on price or I’m hearing rumors? So I’m the CEO, let’s say. How is that crisis going to get to my desk? Is it that my competitors are beating me all the time? Or is it that, gee, I talked to Joe at that other company, and they’re getting it there for half the price? How does it actually occur? What manifests the inflection point that makes me say, “We’ve got to do something about this?”

Taylor: Usually something’s changed. Leadership has changed. The industry is changing, and they can’t keep up. Tthey’re no longer competitive.

Paul: Dig into that a little bit — the “I can’t keep up.” What does that mean?

Taylor: That means their competitor is getting the products there cheaper, faster. They’re better.

Paul: So I’m, I’m losing out.

Taylor: On sales.

Paul: The person who is buying it is going to buy from Joe because he got it there for $10 cheaper than me. Or maybe a day earlier than me.

Taylor: Exactly.

Paul: Interesting. So I’m talking about not just one bag a flour, I’m talking about a train-load of flour that’s been processed and turned into bread or something.

Taylor: Or there’s a crisis, as you said. The supply chain breaks, and they’ve made a mistake, and they’re totally losing business, you know.

Paul: So they didn’t plan well. They didn’t predict that they need a million loaves of bread on this day?

Taylor: Yeah. So it could be a planning issue. It could be a whole host of things that causes something to break, and there’s an emergency.

Paul: Well let’s go to that. So let’s say there was a problem with the wheat crop, just to use something that is already identifiable by people. Wheat turns into bread. So would logistics cover the fact… Would you have thought about it? Do you have contingency plans for if the wheat crop is bad? Do you have leading indicators saying, “Hey, you know, it doesn’t look like we’re going to have a lot of wheat in the fall.” Or do you just react?

Taylor: Well, either way. You can. And usually good logistics folks are good business people, and they’re looking for those leading indicators, and they’re staying up with the market. They’re listening to their sales team, and they’re trying to gather data so that they can be proactive and ready to go so that that crisis doesn’t happen.

So it’s a combination of our talents are as logistics professionals but also with a business mindset. And therefore, we can not only help the shippers, we can also help the transportation providers that are on the other side of the table.

Paul: Okay. So I’m a trucker. I own a fleet of trucks or trains. You can help me how?

Taylor: Because we understand that market, and we might be ahead of them in saying, “You know, the trend is that you have a smaller truck that can go faster,” which is not true. But anyway, we help them with those market trends because we’ve got our eyes on the market. We’ve got our eyes on the logistics methods and processes, and sometime, when you’re doing something the same all the time, you’re missing those opportunities. You’re not looking enough ahead. You don’t know the industry well enough that you’re serving.

So again, we bring, as you think about it, the shipper, the transportation provider or logistics provider, they’re just on opposite sides of the table. So if we can help one, we can help the other. A lot more strategy work for the transportation provider, for example. We’re not going to tell them how to run their business, but we might give them a direction that they ought to be heading towards this market or talking to this type of company. Or what’s the solution you’re going to bring to them?

Paul: So let me ask this. So, sand, 20 years ago, probably wasn’t in big demand like it is now. So did somebody see that coming and say, “Oh my gosh. We’ve got to get a lot of trucks or trains ready for sand”? Because, I mean, that sounds like… Let’s assume we were at a steady state so that the trains were running with plastic and whatever they were filled with. And all of a sudden, we need sand for a completely new technology effectively. It’s certainly at the consumption levels. Well, the trains are all full. In other words, they only have so many train, and they’re delivering plastic already. And they’re delivering whatever they deliver. So is that something that you guys would have helped predict? And was that something that you helped, or how did the whole logistics community react to that huge need, sort of that inrush current? Like, oh my gosh, there’s just a huge need all of a sudden.

Taylor: Yeah. It was a really interesting thing to be a part of because if you think about how much sand has moved on rail before fracking, it was really boring and steady. You know, it was moving sand to a casting shop, or it was moving sand to make fiberglass, which are decent volumes of sand, but literally, over the past, I’d say, seven, eight years, the volume of sand moved by rail has gone up, eight to ten times.

Paul: But where did they get the trains?

Taylor: It’s that type of product, you have a locomotive. And whoever is going to move the sand, they have to buy the car, or lease the car. So there were not enough of the small…what they’re called, small covered hoppers. You have to have a small car because it’s so heavy, there’s a limit. So the size of one of these small-covered hoppers was perfect for sand. It used to be used for cement too. So those cars went from, again, building one thousand or two a year to building tens of thousands a year.

Paul: Is that really? That’s the magnitude?

Taylor: Yeah, yeah.

Paul: They’re producing them now? And so they’re rushing to build these cars.

Taylor: Yeah. And over the last seven or eight years, the frac sand world has had three ups and downs. And every time, the market isn’t mature enough. All the different aspects of that market are so immature that there’s vast over-building and then shortages. Because it moves so quickly compared to conventional, vertical drilling that was very sleepy. The hydraulic fracturing came upon us very quickly. And as people figured it out, they needed all these materials—

Paul: And they needed it now.

Taylor: And they need it now, and they never had to move anything by rail.

Paul: So they don’t know how to order it or move it or get it there. So what did they do? I mean, I’m sure they’re talking about millions of dollars’ worth of investments to do these new wells. So what did they do? How did they order it? And then they call the train company and they say, “Well, we don’t have any cars.”

Taylor: Yeah. Well, that whole supply chain had to get set up because the sand was mined throughout the country for these other purposes, but nearly all the best quality sand was in Wisconsin and Illinois and Minnesota due to the geology. It was needed in Ohio, Texas, North Dakota.

Paul: And were there good trains between those places?

Taylor: Not really. Not really.

Paul: So did they build new train tracks?

Taylor: Yeah, especially to North Dakota. The railroads built billions of dollars of investment to get more capacity to move sand in and crude out. So again, it sent shockwaves through the railroads because they had to improve their service. They had to go to places they weren’t used to going to. And then you think about the shippers. They had to go out and figure out how do you get one of these railcars because an oil company didn’t use anything in rail. So that’s how we started with a couple of oil and gas companies. They realized, “We’ve gotta get good at rail. We don’t know who to call. We don’t know how to buy a car. We don’t know how to schedule service.”

So, we got to help a couple folks early on figure it out for themselves. They became experts, and we’ve moved on and helped many other folks since that. That’s another way that we help people is when they’re new. They just don’t know. And working with railroads is quite unique. So we have railroaders on our team, and we have shippers on our team, so we know how to work with the railroads.

Paul: Yeah. As we talk about this, you mentioned supply chain, and I’ve never really understood that. I’ve understood it at sort of maybe a micro level that, if I’m going to make cakes for people, I need to get salt and eggs, and flour. And then I say, “Well, I’m going to be making one cake a week. So I want it delivered on Tuesday because I can bake it and deliver the cake on Thursday. But you’re multiplying that millions or tens of millions. So I don’t need just a dozen eggs. I need a million eggs. And that’s just something that I don’t think about as I’m living my day, is the magnitude of this.

So are there other things? We’ve talked about plastic and sand. Is it just that? Bulk logistics, it’s bulk. Lots of stuff. Do you guys do anything else beyond just figure out how to optimally move stuff and improve that. And I guess, a small percentage change in that, it calculates to lots of money. So there’s huge benefit to having somebody come in and look at that because if they can save one percent, it’s still a lot of money.

Taylor: Yeah. Exactly. Those two aspects, like I said, we’ve got folks from both sides of the table — shippers, transport companies. So we can help those folks all day long improve, look in the right spot for business, etc. because of the wealth of talent. And since we’re out there helping people, we’re usually in a pretty good position to know where the trends are at.

Paul: Yeah. That’s really cool because now I can hire you and sort of know what all of the best practices are out in the world. It’s sort of a way to get intelligence out there that I wouldn’t really know otherwise. You know that if you do A, B, and C, it will work. If you do it B, C, and A, it won’t work.

Taylor: Yeah. The other third of our business — and again, these are just rough orders of magnitude — are people that are investors. And they need to be smart, very fast. So they want to—

Paul: Now you’re not talking about like me, with my IRA or my retirement fund. You’re talking about commercial or, I guess, institutional investors?

Taylor: Correct.

Paul: Big, big organizations that invest.

Taylor: Yeah. Especially private equity. Private equity wants to put your money… Somebody else, some wealthy individual’s money to work very quickly with a high return. So they want to find these trends as early as they can, make sure they’re buying, they’re paying an appropriate amount for this company that they’re buying or investing in and do it in an extremely fast manner. So they need somebody that’s an expert in one of these markets, and, as you’ve heard, a lot of these markets we deal in are very dependent on logistics.

Paul: So do you provide advice about the logistics portion of that business or the whole business?

Taylor: Could be both.

Paul: Really.

Taylor: Could be both because some of them, logistics is the business. Say they want to buy a company that cleans out chemical tanks that are on the back of a tank truck. And we’ve got chemical industry veterans. We’ve got folks that have been in the service industry. We can quickly go in and assess how good of an investment that is.

Paul: I see.

Taylor: So we also might help them with their strategy because we’re so advanced in understanding the world. Their sharp analysts might take a year or two—

Paul: I see. To come up to speed.

Taylor: —to get there, and we can get in there in six weeks.

Paul: I see. Well that’s a huge benefit. So I’m an analyst at an investment firm, and I’m thinking about buying this type of company. I identify several of them, and I can come to you to say, give me the inside scoop on some of their costs and their expenses, even where it’s going, as you could project that.

Taylor: Or how are they perceived in the marketplace.

Paul: Oh, that’s a good point. Yeah.

Taylor: How, how efficient are they? What’s their infrastructure look like compared to the competitor? All those different aspects, we can help them assess it very quickly. And as you can imagine, when a company is for sale, they put together a wonderful marketing package that always has the same forecast. It’s always going up. And many times, it’s probably not going to happen. And our folks can go through the assumptions and look at the market and say, “Boy, yeah. I think they can do it.” Or, “You need to pay less because there’s no way they’re going to do that.”

Paul: I see. Well, that’s cool because everything else they’re consuming is historical. You know, it’s looking at what they did last year. It’s looking at how they did it, maybe their competition last year. But it’s nothing really looking forward. Or just an analyst sitting there saying, “Oh, I think they’re going to do this much looking forward.” Here’s tactical, right on the ground, to say this is what’s really happening. That’s very cool.

Taylor: Yeah. They might consume a lot of forecasts. And they pay tens of thousands for those forecasts. But it doesn’t mean they’re right. It doesn’t mean that they’re directionally correct, or they might have a flaw in them that nobody else realizes.

Paul: So for the normal, on-the-street person, this is a thriving business that has one aspect of the machine that is our economy. And you focus on making sure stuff gets there when it needs to get there at the most optimal way it can get there. So it seems like a niche but it’s integral to everything that happens. So if that, as you said, if that supply chain breaks down, there’s huge ripple effects, I would imagine. Businesses can’t deliver their products. People can’t buy bread, and supermarkets can’t stay in business, if we don’t have plastic for wrapping food. And so it’s really cool to me to be sitting here talking to somebody that focuses on this seemingly small, maybe even esoteric, from the pedestrian, just a normal person walking down the street. But this is so integrated into everything we do. And it’s sort of part of this big machine that goes on, that delivers all of the things that we’re used to getting.

Well, we’ve been talking with Taylor Robinson, President of PLG Consulting, experts in bulk logistics.